How Direct Oil and Gas Participation Works
Who can participate, how the process works, and the strategies participants use, from deducting a project’s intangible drilling costs in year one to the 3–5x multiple Summit targets over three to five years.
Five steps from first conversation to JV member
Every project is selected and underwritten toward Summit’s target of 3–5x over three to five years. Every step below exists so you know exactly what you are joining before you commit.
- 1
Learn the model
Understand working interests, the JV structure and the Buy Right, Manage Right, Exit Right framework.
- 2
Private strategy call
Talk through your goals, your income and whether the structure fits. Your CPA is welcome to join.
- 3
Verify accredited status
Participation is limited to accredited individuals and entities under SEC Rule 501, verified before any commitment.
- 4
Review the documents
Go through the offering documents, joint operating agreement and project cost estimates with your own advisers.
- 5
Join and onboard
Become a JV member with governance rights, then receive regular reporting as the project progresses.
Four ways participants approach direct ownership
Each strategy has its own rules and tradeoffs. Choose one to see how it works and who it tends to fit, then explore it in full.
Working Interest & Taxes
How up to 100% of a project’s intangible drilling costs can be deducted in the year they are incurred, against active income such as salary and business income.
Labor, fuel and drilling services make up the intangible portion of a well’s cost. Under IRC Section 263(c) a working-interest owner can deduct them immediately, and the working-interest rule in Section 469(c)(3) lets those deductions reach active income. Once wells produce, percentage depletion continues each year.
1031 Exchanges
How certain oil and gas interests can qualify as like-kind replacement property when you sell real estate, keeping your gain deferred.
Real property is broadly like-kind to other real property, and some working and royalty interests qualify. The 45-day identification and 180-day closing deadlines still apply, along with the rules on boot and replacing debt.
Self-Directed IRAs
When holding energy interests in a self-directed IRA makes sense, and when taxable capital is the better route.
A self-directed IRA can hold oil and gas interests. For working interests, though, income is generally unrelated business taxable income inside the account, and the drilling deductions are largely lost because the IRA does not pay current tax. Knowing the difference is what makes the choice a good one.
The Entrepreneurial JV
Why active participation is the foundation of Summit’s model, and how it connects to both the tax treatment and the 3–5x multiple Summit targets for each project.
JV members hold governance rights, take part in material decisions and share in the operational risk of the venture, alongside Summit’s own capital. That structure is what allows working-interest deductions to reach active income, and it keeps every participant aligned with the project’s results.
Ready to see whether it fits?
A private conversation about your goals, how a current project is structured, and the documents you and your advisers would review.
As a JV member, you receive
- Governance rightsA voice in the material decisions of the venture.
- Regular reportingProduction, costs and performance, project by project.
- Tax documents for your CPASo deductions and depletion can be reported correctly.
